Antitrust's Latest Newspaper Absurdity

By: Mark Fitzgerald Who could have thought the lawyers at the U.S. Justice Department's Antitrust Division could ever top, for absurdity and illogic, the original complaint they lodged against the owner of The Charleston (W.Va.) Gazette and Charleston Daily Mail and its joint operating agreement (JOA) partner, MediaNews Group? This week we learned, that the talented attorneys have crafted an even more absurd settlement to the imaginary problem.

The original 2007 Antitrust complaint was breathtaking in its lack of any grasp of the fundamentals of JOAs. The Division had suddenly discovered there was a monopoly of newspaper publishing in Charleston -- apparently unaware that a monopoly on business operations is precisely what a JOA is intended to do. Under the risibly named Newspaper Preservation Act of 1970, newspapers in the same market can ask for federal approval to combine business, production and distribution operations while keeping competing newsrooms.

Charleston's papers have been doing that since well before there even was a Newspaper Preservation Act. The non-compete partnership between the morning Gazette and afternoon Mail has run since 1958.

As E&P wrote in an editorial at the time of the 2007 complaint, Charleston's "JOA worked to 'preserve' the second paper about as well as they usually do: The a.m. paper chugged along nicely, while the p.m. daily slowly bled to death.

In 2004, the Gazette Co. and MediaNews made wholesale changes to their JOA -- and business MediaNews sold the Daily Mail and its 50% share in the Charleston Newspapers JOA to the Gazette Co. But Dean Singleton's company stayed on in Charleston to manage the Daily Mail news for a fee. The newsrooms continued to compete.

Newspapers have hacked up their JOA agreements like this several times in the past -- most notoriously in Detroit -- and Antitrust hasn't said boo.

For some reason, Charleston was different. Antitrust demanded the sale of the Daily Mail be unwound. They suggested they had stumbled on a dark conspiracy to kill the Daily Mail and made the hilariously mistaken legal argument that the Newspaper Preservation Act antitrust exemption only applies to JOAs that intend to keep two papers going in the market.

Again, here's what the E&P editorial said at the time:

"Where have these guys been? From Pulitzers paying the Newhouses not to publish in St. Louis in 1984 to the shuttering of the Cincinnati Post planned for next New Year's Eve (2007), JOAs historically are the last step to the graveyard for second papers. And at every step, the Justice Department did little or nothing to change that."

In a logical world, this complaint would have been kicked to the curb long ago. But these are federal lawyers, and they don't lose because they never let up and have endless time and resources to get their way.

The Daily Gazette inevitably gave up, though they never admitted they had done anything wrong -- and certainly Justice hadn't proven a darn word in their complaint.

Now MediaNews -- which officially filed bankruptcy as this was being written Friday evening -- owns the Daily Mail again, like it or not.

But that's not enough for the feds. You see, they want the Daily Mail to succeed as the second paper in a county that's home to all of 54,000 people. This after Antitrust conceded last year that a second paper, the Rocky Mountain News, could not survive as the second paper in a JOA in a market the size of Denver.

MediaNews will not only get two seats on the five-member JOA board, but four of those members will have to agree on the budgets for both newspapers.

Oh, and there's this from Antitrust's press release: "Additionally, the settlement requires the companies to offer substantial discounts of the Charleston Daily Mail in order to rebuild its subscriber base."

So that's what it takes to rebuild a subscriber base! The newspaper industry owes a debt of gratitude to Washington for that insight.

For all its micromanagement, Antitrust has done, really, nothing to preserve the Daily Mail long-term, and may well have hastened its death by imposing new financial burdens on Charleston Newspapers.

I say this with no pleasure but real sadness: The Daily Mail will fold, probably sooner than later, because that's what happens to the weak paper in a JOA. The over/under is three years.